EXCLUSIVE: Board of Water Supply owed millions

HONOLULU (HawaiiNewsNow) - Federal prosecutors have accused local businessman Albert Hee of being a tax cheat. They now say he's a corporate deadbeat.

In a superseding indictment filed several months ago, a federal grand jury said that Hee's company owes the Honolulu Board of Water Supply $5 million. The company was supposed to pay the money in 2013 to cover back lease payments for its underground cables but reneged.

"Five million dollars is a lot of change and I am disappointed that efforts were not made to collect that money," said Honolulu Councilwoman Ann Kobayashi.

"If you don't pay your water bill, you get a phone call or a letter, I'm sure."

That $5 million is for lease payments owed to the Honolulu Board of Water Supply. Back in 2002 when Sandwich Isles was just getting going, Hee made a deal to use some of the utility's underground water mains to install telephone lines. The phone lines were for Hawaiian homesteaders living on Oahu.

But according to the indictment, Hee ordered his employees not to make a payment and told the utility that he wasn't bound to do so.

Federal prosecutors said the nonpayment became a crime when Hee booked the $5 million payments as a business expenses on a sister company's tax returns, even though the payments were never made. The alleged false deductions resulted in Sandwich Isles underpaying its taxes by $3.6 million, the feds said.

So far, Board of Water Supply hasn't taken any legal action to collect on the debt.

The loss comes to about $30 per customer and it's money the embattled utility and its ratepayers could have used.

"If they had invested in a proper phone system or a proper billing system, sure that $5 million would have helped," Kobayashi said.

That billing system. installed in 2013, initially overestimated customers bills by hundreds of dollars and many irate customers were forced to wait for hours to speak with a rep.

A Board of Water Supply spokeswoman declined comment.

Founded by Hee in the early 1990s, Sandwich Isles Communications provides rural telecommunications services for Hawaiians living on homestead lands.

To do that, the company has received more than $400 million in federal subsidies and low-interest loans over the years. At one time, the government was paying the company $13,000 in subsidies for each of its phone lines.

Hee, the brother of former state Sen.Clayton Hee, is politically connected and his board and staff includes Kamehameha Schools Trustee Janeen Olds and retired Adm. Robert Kihune, also a former Kamehameha Schools Trustee. The company previously employed former state lawmakers Tom Okamura and Devon Nekoba.

A previous version of his tax charges alleged that Hee and his family received $1.7 million in false wages and bogus benefits from the companies he controls. That included $121,000 in personal credit card expenses and $92,000 for therapeutic massages, the government alleged.

If convicted, Hee faces up to three years for each of the tax fraud charges. His trial is set for later this month.